Business Plan for South West Airline - Essay Example

Business plan for south west airline Outline Executive summary 2. Company overview 3. Objectives or goals 4. Situation analysis 5. Market/product/customer analysis 6. Marketing strategy 7. Financial projections 8. Implementation plan 9. Evaluation and control metrics Executive summary South west airline is the largest airline in the world that provides carriers of extremely low costs (Gittell, 230). It is one of the most recognized airlines in the United States. It was recognized as the third most admired company in America back in 2004. It serves a big clientele thus adding to its profits. It has introduced various new fleets into its market including the 737-800 which holds 175 passengers as opposed to the regular 143seaters. This company has really inspired other carriers especially the low cost ones. It combines its employee’s productivity and the productivity of its aircraft with the low unit costs incurred. This is its competitive strategy. This plan looks into details the company’s information including its market and competitive strategies. It also conducts a SWOT analysis on the company and gives adequate recommendations. Company analysis. This airline company is situated in Dallas –Texas. Founded in 1967, the airline company started its operations in 1971. It has approximated employees of 44831 employees. It operates a total of 3400 or more flights per day. It flights services 89 destinations in 42 states. It has over 550 Boeing 737 operating at a high rate of six flights each day. It acquired fellow Air Tran Airways in 2011 and expectations are high on integrating the carriers by end 2014. The company became one airline in 2012 after it was issued with an operating certificate (J. Leach, 34). Objectives or goals The mission of this airline is the dedication to provision of high quality customer service delivered in a way of bringing out warmth to the customers, friendliness and the best company spirit. The CEO, Gary Kelly admits that the company’s employees are their competitive strategy. The company has a purpose of connecting all individuals to the most important aspects of their lives in a friendlier, more reliable and very pocket friendly travel. Thus, it aims at having a large clientele base. To ensure quality customer service, the company motivates its employees. It ensures that their pay is good thus the employees are ever smiling especially the ones in close contact with the clients. The company also enhances its vision and mission to its employees by the power of storytelling. This also strengthens the employees’ daily interactions with customers. Every month, the south west spirit magazine has a story of one of its employees who has succeeded in the field. This motivates other employees. The stories are also accompanied by videos to assist all employees in visualizing each and every step they make. The company ensures that it is friendly to its customers. In one of its stories, a customer-Jessica and her kids accompany her husband to the airport to bid him goodbye. One of the service agent allowed them to walk to the gate. This gave them 30 minutes more to be together before the husband travelled. Another attendant allowed the family to walk to the plane thus allowing them to give the husband one more hug before departure. This shows the extent of the friendliness of the attendants to the customers (Friedlob and Plewa, 456). Thus the company has several goals: Providing low cost flights Provision of reliable flights providing high quality customer service providing friendly customer relations Employee’s motivation The Company has a competitive advantage compared to other airline. Its competitive strategy is combining the effectiveness of its employees and their fleet and the low cost flights they provide. By so doing, they are able to maximize on profits while reducing on costs. This is by increasing their range of customers and providing high quality services. Situational analysis. Just like any other company, the south west company has its strengths and weaknesses. Strengths: it provides high quality services to its customers thus ensuring customer satisfaction It provides low cut on costs thus ensuring that customers pay less for their fights It motivates its employees thus ensuring that they provide high quality services to customers It offers friendly customer services to its customers It has a large number of planes thus covering a great range of customers. It takes covers over 89 destinations across 42 states. Its employees are heavily unionized thus they cannot be discriminated in any way. It is among the ten safest airlines worldwide as it has never seen any of its passengers die on board due to plane crash. The company also has an established brand. This has increased to its success. This is because people intending to take flights to various destinations always consider airlines with reputable brand name and minimal cases of accidents. Weaknesses The Company has been known to have accrued debts. Its estimated debts range at $361 billion. It is likely that these debts continue dragging them down unless they pay it off. The company also experiences high operating expenses. The price of plane fuel skyrocketed in 2011. The customers on the other hand need a constant improvement of services thus requiring them to dig deeper into their pockets. Moreover, all the unions constantly demand for increased salaries and other allowances for their customers. Therefore, the company suffers greatly in their operating expenses. Opportunities Continued expansion of markets in addition to products. In 2011 for instance it added several cities to its list including South Carolina and New Jersey (Renga and Mentges, 345). It also has an opportunity of gaining the America’s market share. This is due to increased cases of American airlines making negative headlines. Thus, the southwest airlines have that opportunity to return the original zeal. The company has also had the opportunity for acquisition. It acquired Air Tran in 2011. Further acquisitions are possible for the company. Threats Weather uncertainty has continued to be the major threat for the airline. Natural disasters can lead to the company experiencing heavy losses. Due to the unpredictability of Mother Nature, there is always a high level of uncertainty on how the weather will be. The organization also faces a lot of competition. It poses as a threat to many airlines due to its low costs. Thus, it has to come up with competitive strategies everyday to ensure that it remains at the top. Plane oil prices also hike every now and then. Thus, the company is faced with a tough choice of either passing the strain to the customers by increasing their fares or just swallowing it and having to ruin their budgets. The American economy might also be shaky sometimes. It operates mainly in the United States. Therefore, any economic struggle or downfall can drastically affect its business. Market/product/customer analysis The Company had a net income of $754 million in the financial year of 2013. The net income was approximated at $805 million. Its average passenger load factor was at 80.1% and it operated at revenue of 17.7%. In 2013, it made a return of $611 million to shareholders. This was through repurchase of $540 million of stock. It also distributed dividends worth $71 million. It has been providing low cost fares on all passengers thus increasing on their markets. Marketing strategies Product positioning. It projects a good image to its customers due to the competitive market. It positions itself as the only airline offering low cost flights, quality services, reliable flights and customer friendly. By so doing, the customers view it as the only company with these factors. This serves to its advantage. Positioning its market strategies –it require to be very cost efficient. It has an extremely well organized and defined business model (Webster, 234). It increases it markets by doing things other airplanes have not done. For instance it failure to assign seats during bookings. Thus, the plane can get more passengers at the gate thus increasing its number of flights and increasing the routes they take Marketing strategies- the airline offers travel product that targets a specific location. Their tickets are also priced in a much simplified manner. Thus, the passengers are aware of what to get even before making payments. Brand loyalty- the company has continued to improve on their brand loyalty. This is by recording very few accidents thus the airline is recognized among the top ten safest planes in the world. The company ensures reduction of noise pollution and air pollution. Thus they avoid ruining their reputation. Pricing strategies-They have a clear target, thus it has the mission of providing the lowest customer fares to improve their profits. Thus, it is able to compete with other means of transportation in addition to other airlines. When other airlines tried to cut their costs like southwestern airlines do, they suffered considerable loses. Product distribution strategy-They market their products directly by use of the internet and phones. This does not require a middle man. It does not offer the same airfares like other airlines. Financial projections The Company has continued to enjoy increased profits due to its marketing strategies. Annual Income Statement Data Actuals in M $ Estimates in M $ Fiscal Period December 2011 2012 2013 2014 2015 2016 Sales 15 658 17 088 17 699 18 236 19 081 20 059 Operating income (EBITDA) 1 554 1 682 2 315 2 753 3 046 3 157 Operating profit (EBIT) 839 838 1 448 1 844 2 073 2 297 Pre-Tax Profit (EBT) - 685 1 209 - - - Net income 178 421 754 1 023 1 144 - EPS ( $) 0,23 0,56 1,05 1,47 1,71 2,15 Dividend per Share ( $) 0,02 0,04 0,13 0,14 0,14 0,17 Yield 0,08% 0,14% 0,54% 0,57% 0,58% 0,68% Announcement Date 01/19/2012 11:45am 01/24/2013 11:45am 01/23/2014 01:00pm - - - Finances – Leverage Actuals in M $ Estimates in M $ Fiscal Period December 2011 2012 2013 2014 2015 2016 Debt 607 184 - 1 045 636 - Finance - - 332 - - 133 Operating income (EBITDA) 1 554 1 682 2 315 2 753 3 046 3 157 Leverage (Debt/EBITDA) 0,39x 0,11x - 0,38x 0,21x - Capital Expenditure 968 1 348 1 447 1 548 1 521 1 550 Book Value Per Share (BVPS) 8,88 $ 9,57 $ 10,5 $ 11,3 $ 12,6 $ 13,4 $ Cash Flow per Share 1,79 $ 2,73 $ 3,47 $ 3,36 $ 3,77 $ 3,63 $ Announcement Date 01/19/2012 11:45am 01/24/2013 11:45am 01/23/2014 01:00pm - - - Balance Sheet Analysis Implementation plan The Company has to implement on its strategies to continue improving on its profits. It has to continue improving on its customer’s satisfaction. It has to enable its promotions to be timely and up to date. It also has to guarantee that it monitors all its stratagems to assess whether they are working should take place often and reviews made. The company is also planning to continue with its expansion to ensure that it serves a much wider clientele. Evaluation metrics and control. The company should ensure that it evaluates its marketing plan recommendations. To do this, it has to assess its recommendations. The methods for undertaking this assessment should be both quantitative and qualitative (Cohen, 23). Quantitative because it deals mostly with numbers and qualitative to ensure that the quality of services provided is considered. By so doing, the company continues making more profits. Work cited Cohen, William A. The marketing plan. New Jersey: J Wiley, 2006. Friedlob, G Thomas and Franklin James Plewa. Financial and business statements. New York: Barrons Educational Series, 2006. Gittell, Jody Hoffer. The Southwest Airlines way. New York: McGraw-Hill, 2013. J. Leach, Ronald Melicher. Entrepreneurial Finance. New Jersey: Cengage Learning, 2014. Renga, Alan and Mark E Mentges. Pacific Southwest Airlines. Charleston, SC: Arcadia Pub, 2010. Webster, Frederick E. Industrial marketing strategy. New York: Wiley, 2011. Read More